Ocado won't budge on Morrisons deal

An update on the Ocado-Waitrose-Morrisons love triangle this morning from the online retailer, which says that, like a spurned lover, Waitrose must understand that Ocado needs to move on.

The relationship between Ocado and Waitrose has been complicated since Waitrose became, essentially, its competitor as well as its main supplier. Although Waitrose was Ocado’s first and only supplier when the company originally launched, in 2008 the supermarket launched its own delivery service which competed against it. It was an odd situation at the time, and left analysts questioning why Ocado had put all its eggs in Waitrose’s (shopping) basket.

Fast-forward to May this year, Ocado (which is three years into a 10-year supply contract with Waitrose that doesn’t have a break clause until 2017) announced that it had signed a 25-year deal to provide the logistics for Morrisons’ new online offering, which will be run under the supermarket’s brand.

Predictably, Waitrose wasn’t very happy about that, saying it would check whether there had been a contract infringement – but in a trading update this morning, Ocado said its ‘rights and obligations to source products from Waitrose remain unaffected by the arrangements’. And that was pretty much it.

The update showed Ocado is edging tantalisingly close to that business holy grail, the profit – but alas, its earnings dropped from a pre-tax profit of £200,000 in the previous half-year to a pre-tax loss of £3.8m in the 24 weeks to May 19. The loss was driven in part by increased distribution and delivery costs, as well as investment in new distribution centres.

Revenues, on the other hand, rose by 15.6% to £355.9m, up from £308m last time. Customer numbers rose from 337,000 to 360,000, while 94.4% of deliveries arrived on time, up from 93.2% last time.